Opposition Brief — Ejay Travel, Inc. v. Algemeen Burgerlijk Pensioenfonds

No. 93-1536 3) Bayram Cour, Uf

TTT E D

ig Y -2 004

upreme Court of the Anited ult

A OFFICE OF THE CLEA

October Term, 1993

EJAY TRAVEL, INC., NANCY DEMBOWSKI, VIRGINIA L.

GRANDY, T. SEAN CRUMLISH, ROBERT ALLEN,

REGENT INC. OF 15TH STREET d/b/a GIORGIO BRUTINI,

LEGXPRESS, INC., PENNSYLVANIA SQUARE CORP.,

ANTHONY VINCIGUERRA, JOHN M. CORCORAN,

SUNSHINE PERSONNEL, INC., ROYAL BANK OF

PENNSYLVANIA, ROBERT J. ATLEE, C.W.D.

ENTERPRISES, INC., d/b/a CHRIS’ CAFE AND BAR, THE

HAPPY ROOSTER, INC. and LINPRO PHILADELPHIA

CENTER CITY OFFICE I, LTD.,

Petitioners,

vs.

ALGEMEEN BURGERLIJK PENSIOENFONDS,

Respondent.

Petition for a Writ of Certiorari to the United States Court of

Appeals for the Third Circuit

RESPONDENT’S BRIEF IN OPPOSITION

KATHLEEN M. COMFREY STEPHEN A. COZEN

SHEARMAN & STERLING Counsel of Record

Citicorp Center ROBERT W. HAYES

153 East 53rd Street E. J. BORRACK

New York, New York 10022 COZEN AND O’CONNOR

(212) 848-4000 The Atrium, Third Floor

1900 Market Street

Philadelphia, Pennsylvania 19103

(215) 665-2000

Attorneys for Respondent

4996 )

bz (800) 3 APPEAL + (800) 5 APPEAL * (800) BRIEF 21 NX

DZ erices, inc. QQ \

QUESTIONS PRESENTED

Whether this Court should grant certiorari over an appeal

raising fact-bound issues as to the interpretation of a statutory

provision it clearly construed on several occasions, including in

each of the last two terms.

Whether this Court should grant certiorari where the Third

Circuit Court of Appeals simply applied the correct legal standard,

as enunciated by the clear terms of the statute and recent decisions

of this Court, and as uniformly recognized by other courts of

appeals, to the facts as found by the district court after an extensive

review of the record, to hold that respondent Algemeen Burgerlijk

Pensioenfonds is immune from suit pursuant to the Foreign

Sovereign Immunities Act.

Whether this Court should grant certiorari where petitioners

essentially request that the Supreme Court review the district

court’s findings of fact.

ii

LIST OF PARTIES

The parties to this proceeding include petitioners, as listed in

the Petition for a Writ of Certiorari, and respondent, Algemeen

Burgerlijk Pensioenfonds (“ABP”), the General Civil Pension

Fund of the Netherlands.'

1. Incompliance with Supreme Court Rule 29.1, the following subsidiaries of

ABP are wholly-owned: Galgenwaard B.V., N.ILLH. B.V., World Trade Center

Amsterdam! B.V., Abp Vastgoed Holding B. V. and Beheersmaatschappij WTC.

iii

TABLE OF CONTENTS

Page

ones dence cecovceesoeste i

el ecu l vids dbce vd ode ccvecceeeve ii

Ee iii

NS iv

Statement of Jurisdiction ............... 0.000000 ee. l

ti a |

Reasons for Denyingthe Writ ...................0.. 10

I. This Court has already conclusively interpreted the

commercial activity exception. .............. 1]

II. The Third Circuit's decision is not inconsistent

with decisions of othercircuits. .............. 12

III. The Third Circuit correctly interpreted the third

clause of the FSIA and its conclusion is consistent

with the plain language of the statute, with recent

Supreme Court precedent and with decisions of

ES Carers toch bas cktecsnebesses 14

IV. This Court should not grant certiorari to review the

district court’s factual findings. .............. 18

V. Because the district court’s findings were not

clearly erroneous, the Third Circuit was correct to

limit its review to those facts developed below. .. 20

iv

Contents

Page

GREE ccnvccntnccecussendenndpessesbheaeres 22

TABLE OF CITATIONS

Cases Cited:

Antares Aircraft v. Fed. Republic of Nigeria, 999 F.2d 33

(2d Cir. 1993), cert. denied, __ U.S. __, 114 S. Ct. 878

ERE. secudenchiseseoedes #04staee anaes 12,13

Arriba Lid. v. Petroleros Mexicanos, 962 F.2d 528 (Sth Cir.

SE dawn sb G500 6450004 conedbedebaubusetacase 16

Bass v. Attardi, 868 F.2d 45 (3d Cir. 1989) ............. 20

Clark v. K-Mart Corp., 979 F.2d 965 (3d Cir. 1992) ..... 20

Federal Insurance Co. v. Richard I. Rubin & Co., Inc.,

Eastern District of Pennsylvania, Civil Action No. 92-

GET bse nuaeredieundeedeesenssadevencccdeves a

Federal Insurance Co. v. Richard I. Rubin & Co., Inc., 12

ee ocdanraceandd cus ves 7,21

First Nat’l City Bank v. Banco Para El Comercio Exterior

poe eR Peer rrrrr rrr re 8, 16,17

Foremost-McKesson v. Islamic Republic of Iran, 905 F.2d

SEED ole cbs secects cui seit ceties 16

General Elec. Capital Corp. v. Grossman, 991 F.2d 1376

CE och vcnevesndusnedad na demencne cds 12, 13

Vv

Contents

Page

Gibbons v. Vdaras na Gaeltachta, 549 F. Supp. 1094

SEMEN. SS cecSodevddasearriccle 12

Goodman v. Lukens Steel Co., 482 U.S. 656 ty Pre 18

Hercaire Int'l, Inc. v. Argentina, 821 F.2d 559 (11th Cir.

Ms 00 0h dommdabscasccreee tie ert ee 16

Hester Int'l Corp. v. Fed. Republic of Nigeria, 879 F.2d 170

a” 2 SOE Aaa eee cia | 4 Ree yee 16

| Inre Capital Cities, 913 F.2d 89 (3d Cir. 1990) ......... 20

Letelier v. Republic of Chile, 748 F.2d 790 (2d Cir. 1984),

cert. denied, 471 U.S. 1125(1985) ................ 16

Republic of Argentina v. Weltover, Inc., __ U.S. ys

Racer AN Sp Rega Sarge Se 11,15

Salve Regina College v. Russell, 499 U.S. 225 (1991).... 18

Saudi Arabia v. Nelson, _ U.S. —» 113 S. Ct. 1471 (1993)

EL ET TER TOOT EEE PN OST 8,11,15

; ? , ,

Siderman de Blake v. Republic of Argentina, 965 F.2d 699

(9th Cir. 1992), cert. denied, __U.S.__, 113 S. Ct. 1812

CIEE os heeded s Us chai cd nlc) Sees ee ec, 12,13

Texas Trading & Milling Corp. v. Fed. Republic of Nigeria,

647 F.2d 300 (2d Cir. 1981), cert. denied, 454 U.S. 1148

GUE Medvvversicercuscscdcccctcs 12, 13,14

i.

vi

Contents

Page

Vermeulen v. Renault, U.S.A., Inc., 985 F.2d 1534 (11th Cir.

SPEPPPTTTTTITITITITTTTireiriei rt 12,13

Statutes Cited:

SO MGR) co cccccccccsccesececcedeneestes 1

y it Fob) | PPPVETTOTTPTTTTTTTeTerTTTrreieeee 3

POU BE. SIGE no ccccccvccccccccccccscsveces l

2B U.S.C. § 1603 0.0... ccccecececeueeueeueeueee: ‘< 3

PPO PEED ccc vecsvecscvcccesesecersues 4, 5

yp ith Po Fy) +) eT 4

Rules Cited:

DETCIB GUC TIUED TD oc ccccccccsvecccesscvesstes 10, 14

Supreme Court Rule 10.1(a) .. 0.6... cee eee eens 12

Other Authority Cited:

H. Rep. No. 1487, 94th Cong. 2d Sess. 29-30 (1976),

reprinted in 1976 U.S.C.C.A.N. 6628-29 ........... 17

]

STATEMENT OF JURISDICTION

On December 28, 1993, the Third Circuit Court of Appeals

reversed and remanded the order of the United States District

Court for the Eastern District of Pennsylvania in these actions and

found, inter alia, that respondent ABP was immune from suit

under the Foreign Sovereign Immunities Act, 28 U.S.C. $§ 1601-

1611 (“FSIA”). Petitioners seek to invoke this Court’s jurisdiction

pursuant to 28 U.S.C. § 1254(1).

STATEMENT OF THE CASE

These consolidated actions represent a few of the over forty

actions arising out of a fire that took place, on February 23, 1991,

at the One Meridian Plaza Building (the “Building”), in

Philadelphia, Pennsylvania.” In each of the actions arising out of

the fire, the plaintiffs sought to recover for loss of life, personal

injuries, property damage or economic losses that they claim

resulted from the fire.

The first of the pending actions was commenced on or about

March 1, 1991, virtually before the smoke cleared from the

Building, in the Court of Common Pleas of Philadelphia County.

Petitioners commenced several additional actions, seeking to

recover, individually and on behalf of classes of entities they

sought to represent,’ for purported property damage and economic

loss.

In support of their claims for relief, petitioners essentially

2. All but these consolidated actions and one other action have since been

settled.

3. On July 16, 1993, petitioners’ Motion for Class Certification was

denied.

2

alleged that the fire started through the spontaneous combustion of

linseed oil which was negligently stored in the offices of one of the

Building tenants. They asserted that it spread beyond the area of

origin as a result of a combination of factors, including the failure

of certain aspects of the Building’s fire detection, alarm and

suppression and other emergency equipment.

Petitioners sought to hold numerous parties responsible for

the origin and spread of the fire, including E/R Associates, the

owner of the Building, and Richard I. Rubin & Co., Inc., which was

responsible for managing the Building. In this respect, petitioners

specifically alleged in their Complaint that E/R Associates was a

general partnership, consisting of Pan American Office

Investments, Inc., The Equitable Life Assurance Society of the

United States and USA One Associates, which was itself a

partnership consisting of two Dutch corporations, USA One BV

and USA Two BV.

Petitioners also named ABP as a defendant in these actions on

the tenuous basis that it owned all of the stock of USA Holding BV,

another Dutch corporation, which owns all of the stock of USA

One BV and USA Two BV. Petitioners did not, and could not

truthfully, allege that ABP owned the Building or was a partner in

E/R Associates. Instead, they asserted, as they have throughout

these cases and continue to assert in their Petition for a Writ of

Certiorari, that ABP negotiated to acquire an interest in E/R

Associates, created USA One BV and USA Two BV to make this

investment and, thereafter, made crucial decisions about the

operation of the Building.

ABP is the General Civil Pension Fund of the Dutch

government, responsible for providing, inter alia, retirement and

other benefits to those who fought in the resistance during World

War II and to the civil servants of the Dutch government. It was

created by an act of the Dutch Parliament as an agency of the Dutch

3

government, and there are no shares of stock or other certificates of

ownership existing or contemplated in connection with ABP. It is

governed by a Board of Trustees appointed by Royal Decree and

maintains its principal place of business in the Netherlands.

Accordingly, ABP squarely meets the definition of an agency

or instrumentality of the Dutch government, thereby qualifying as

a foreign sovereign under the FSIA. 28 U.S.C. § 1603. As such,

beginning on April 3, 1991, ABP removed each of the actions

petitioners commenced to the United States District Court for the

Eastern District of Pennsylvania pursuant to 28 U.S.C. §§ 1330 and

1441(d) (which respectively confer jurisdiction in the district

courts over any actions commenced against a foreign sovereign

and permit the removal of any such actions).‘

Thereafter, several actions arising out of the fire were

commenced directly in federal court on the basis of the court’s

subject matter jurisdiction over claims against ABP. Subsequent

actions filed against ABP in state court were removed.

After the district court consolidated the instant actions,

petitioners filed a Consolidated First Amended Class Action

Complaint (the “First Complaint”). The defendants in these

actions moved to dismiss the First Complaint on numerous

substantive grounds. At the same time, ABP moved to dismiss on

the grounds that as an agency or instrumentality of the Dutch

government, it is immune from suit under the FSIA.

Petitioners responded to this Motion to Dismiss by asserting

4. Defendants USA One BV and USA Two BV joined in these removals.

Although these defendants are agencies or instrumentalities of a foreign

sovereign, they have never contested jurisdiction or asserted an immunity

defense in that this action is based upon their purported commercial activity.

5. On August 26, 1993, petitioners again amended their Complaint.

4

that both the commercial activity and non-commercial tort

exceptions to the immunity created under the FSIA, 28 U.S.C.

§ 1605(a)(2) and (5), applied to ABP. Section 1605(a)(2) provides

that:

(a) A foreign state shall not be immune

from the jurisdiction of courts of the United

States or of the States in any case —

** *

(2) in which the action is based upon a

commercial activity carried on in the United

States by the foreign state; or upon an act

performed in the United States in connection

with a commercial activity of the foreign state

elsewhere; or upon an act outside the territory

of the United States in connection with a

commercial activity of the foreign state

elsewhere and that act causes a direct effect in

the United States.

In support of this position, petitioners introduced deposition

transcripts and documents which they contended demonstrate that

USA Holding BV, USA One BV and USA Two BV are “paper

subsidiaries” through which ABP controlled the operation and

management of the Building. Based on these factual assertions,

petitioners argued that ABP had waived its sovereign immunity.

ABP disputed these assertions contending that, while it did

finance the acquisition of an interest in E/R Associates by USA

One Associates, it did not acquire an interest in the Building or

control the Building’s operations. ABP created USA Holding BV,

which formed USA One BV and USA Two BV. USA One

Associates then acquired a sixty five percent interest in the

Building in part with the proceeds of a loan from ABP.

3

While the aforesaid Motion to Dismiss was pending, ABP and

USA Holding BV moved to dismiss the claims asserted against

them in another action, Federal Insurance Co. v. Richard I. Rubin

& Co., Inc., Eastern District of Pennsylvania, Civil Action No. 92-

4177, on the basis of their immunity from suit. Plaintiffs in the

Federal Insurance case also opposed ABP’s and USA Holding

BV’s Motion to Dismiss by arguing that ABP controlled the

operation of the Building and submitted documents in support of

such contention. The Federal Insurance plaintiffs asserted that the

purported conduct constituted commercial activity sufficient to

waive ABP’s immunity from suit under the FSIA.

The district court decided the Motion to Dismiss in Federal

Insurance first, denying ABP’s and USA Holding BV’s Motion.

With the record developed in both the instant actions and in the

Federal Insurance action before it, the district court initially held

that ABP and USA Holding BV are agencies or instrumentalities of

a foreign sovereign (Petitioners’ Appendix (“Pet. App.”) 126a).

Furthermore, it expressly rejected the argument that ABP

exercised undue control over USA Holding BV or that USA

Holding BV exercised undue control over USA One BV and USA

Two BV and refused to conclude that ABP or USA Holding BV

actually directed the operation of the Building (Pet. App. 133a-

134a). Nevertheless, it concluded that both of these foreign

sovereigns waived their immunity from suit.

First, the district court held that USA Holding BV had waived

its immunity from suit, pursuant to the first clause of the

commercial activity exception, 28 U.S.C. § 1605(a)(2), simply by

creating USA One BV and USA Two BV. The district court

concluded that this constituted commercial activity in the United

States, as the purpose of creating these corporations was to invest

in real estate located here. The court reasoned that it was proper to

hold USA Holding BV liable for the actions of USA One BV and

USA Two BV on such a basis.

6

The court next found jurisdiction over ABP under the third

clause of the FSIA’s commercial activity exception as a result of

ABP’s extension of the arms-length loan to USA One Associates to

finance its acquisition of an interest in the Building even though

the Court recognized that the loan was executed pursuant to the

laws of the Netherlands, and payments were made to ABP in the

Netherlands in U.S. dollars (Pet. App. 122a, 132a).° The Court held

that ABP’s activity had a direct effect in the United States because

USA One Associates’ acquisition of an interest in the Building was

an “immediate consequence” of the loan transaction (Pet. App.

132a-133a).

Alternatively, the court held that it would work a fraud or

injustice to recognize the separate independent status of ABP and

its wholly-owned subsidiary USA Holding BV, even though it

affirmatively found that there was no _ principal-agency

relationship between these entities and, further, that ABP’s

financing of the acquisition of the Building did not warrant a

conclusion that the transaction was beyond the scope of normal

corporate activities between parent and subsidiary (Pet. App.

133a-134a). The district court’s decision was based solely upon the

court’s conclusion that permitting ABP to establish USA Holding

BV without being held liable for the purported acts of USA

Holding BV’s subsidiaries would allow ABP to “circumvent its

obligations for violations of the United States laws, while

nevertheless reaping the benefits of investing in United States

property.” (Pet. App. 134a).

Thereafter, on April 16, 1993, the district court entered an

6. There is no record evidence or factual finding below that ABP, in order

to keep the payment of this loan current, attempted to implement policies in the

Building or insisted that the Building’s budget be spent in a certain way. Nor

does the record below contain evidence that ABP was an owner or manager of the

Building or that ABP was involved in the formulation or implementation of any

policies at the Building.

=F rr ee eee -,

7

Order and Memorandum Opinion in which it, inter alia, denied

ABP’s Motion to Dismiss petitioners’ Complaint on jurisdictional

grounds, incorporating by reference its Order and Memorandum

Opinion in the Federal Insurance action (Pet. Apo. 117a). As it

found that the commercial activity exception applied, the district

court did not address petitioners’ contention that the non-

commercial tort exception also applied.

ABP and USA Holding BV appealed these decisions to the

Third Circuit.’ On appeal, ABP (and USA Holding BV) argued that

based upon its findings of fact, the district court erred as a matter of

law in its interpretation of the FSIA. In response, petitioners,

recognizing that they could not prevail based upon the record

established in the district court, argued that the Third Circuit

should reverse the findings of fact below. Specifically, they argued

that there was substantial evidence that ABP controlled the

operation of the Building after USA One Associates acquired an

interest therein and that the district court erred in rejecting their

factual assertions.

On December 28, 1993, the Third Circuit Court of Appeals

reversed. See Federal Insurance Co. v. Richard I. Rubin & Co.,

Inc., 12 F.3d 1270 (3d Cir. 1993) (See Pet. App. 1a-47a). The Third

Circuit first accepted the district court’s findings of fact because

they were not clearly erroneous. It then held that the facts found by

the district court, as a matter of law, could not justify the

conclusion that either ABP or USA Holding BV had engaged in

commercial activity sufficient to warrant a finding that they had

waived their sovereign immunity.

The Court of Appeals first applied the FSIA to USA Holding

BV and then relied upon its conclusions as to USA Holding BV in

7. The Third Circuit consolidated these appeals with the appeal in

Holcombe v. Richard I. Rubin & Co., Inc., another action arising out of the fire.

8

its determination of ABP’s immunity. It found that the district

court erred in attributing the commercial activities in the United

States of USA One BV, USA Two BV and USA One Associates

with respect to managing and operating the Building, to USA

Holding BV. Specifically relying upon this Court’s decision in

First Nat'l City Bank v. Banco Para El Comercio Exterior de Cuba,

462 U.S. 611 (1983) (“Bancec”), and the unanimous authority of

the Circuit Courts of Appeals applying Bancec, the Third Circuit

held that the acts of separate juridical entities should not be

attributed to related foreign entities unless one entity has been so

extensively controlled by its owner that a relationship of principal

and agent has been created, or to recognize their separate existence

would work a fraud or injustice (Pet. App. 37a-38a). The Third

Circuit concluded that, given the district court’s affirmative factual

finding that USA Holding BV did not exercise undue control over

USA One BV and USA Two BY, and its failure to articulate any

justification for the conclusion that it would work a fraud or

injustice to recognize the separate corporate existence of USA One

BV or USA Two BV, there was no basis for the district court’s legal

conclusion that the separate juridical status of these entities should

be disregarded (Pet. App. 38a).

Moreover, relying upon this Court’s unambiguous decision in

Saudi Arabia v. Nelson, __ U.S. __, i13 S. Ct. 1471 (1993), the

Third Circuit held that the single act of creating USA One BV and

USA Two BV did not serve to waive USA Holding BV’s immunity

from suit under the first clause of the commercial activity

exception (Pet. App. 38a). The Third Circuit held that the language

of the statute and the Nelson decision clearly mandate that for the

first clause of the commercial activity exception to apply in a

specific action, not only must the foreign sovereign engage in

commercial activity, but the action must be based upon that

commercial activity. It concluded that petitioners could not satisfy

this test because their Complaint was based upon the purported

negligent operation of the Building and not the formation of USA

One BV and USA Two BV.

en

9

In turn, with respect to ABP, the Court of Appeals rejected the

district court’s conclusion that it would work a fraud or injustice to

recognize the separate juridical status of ABP, stating that:

We must reject the District Court’s second

theory of jurisdiction [piercing the corporate

veil from USA Holding BV to ABP] over ABP

because we have already determined that on

this record the Court erred as a matter of law in

concluding that USA _ Holding [BV]

relinquished its sovereign immunity.

(Pet. App. 42a).

The Third Circuit finally held that ABP’s loan to USA One

Associates could not, as a matter of law, be the basis for finding a

waiver of ABP’s sovereign immunity because there was no

substantive nexus between the claims petitioners asserted with

respect to the fire and the loan (Pet. App. 45a-46a). The Third

Circuit held that the mere fact that the loan enabled USA One

Associates to acquire an interest in the Building was an insufficient

nexus between the claims asserted by petitioners and ABP’s

commercial activity.

The Third Circuit remanded to the district court for

proceedings consistent with its opinion. As the district court had

not ruled upon the applicability of the non-commercial tort

exception, the Third Circuit held that it would be permitted to

consider this issue on remand.

Once the matter was remanded, ABP and USA Holding BV

renewed their request to dismiss the claims against them. The

parties have briefed the applicability of the non-commercial tort

exception and the matter is pending for decision by the district

court.

10

Meanwhile, petitioners seek a petition for a writ of certiorari

to review the Third Circuit’s application of the third clause of the

commercial activity exception to ABP. In their Petition, petitioners

argue at length that ABP controlled the operation of the Building in

order to maximize profits and thereby insure repayment of the

loan. They claim that their action is accordingly based upon acts

(directing the operation of the Building) in connection with a

commercial activity (the loan) and, as such, the third clause of the

commercial activity exception applies.

However, in order for this Court to accept petitioners’

argument, it would have to reverse the district court’s factual

finding that ABP did not control the operation of the Building.

Petitioners accordingly seek certiorari essentially to have this

Court review such factual findings. This is not the type of issue

appropriate for Supreme Court review.

REASONS FOR DENYING THE WRIT

Pursuant to Supreme Court Rule 10, a petition for a writ of

certiorari will be granted only where there are “special and

important” reasons. No such reasons exist in the instant matter.

Petitioners seek to convince the Supreme Court to revisit a

well-settled area of law, which it interpreted twice in the last two

terms. The language of the FSIA and this Court’s recent decisions

provide clear and unambiguous guidance as to how this statute

should be applied. Indeed, there has been no disagreement among

the circuits as to the interpretation of the commercial activity

exception since the Court’s most recent decisions.

This case does not raise issues of far-reaching significance or

importance that warrant review by this Court because the Third

Circuit opinion turns on the unique factual circumstances of the

1]

case and the application of the court’s statement of the law to those

specific facts. The Third Circuit correctly applied the appropriate

standard of review in examining this issue and in adopting the

district court’s findings of fact.

I.

THIS COURT HAS ALREADY CONCLUSIVELY

INTERPRETED THE COMMERCIAL ACTIVITY

EXCEPTION.

Given the number of cases and important issues facing this

Court, a relevant factor in determining whether to grant certiorari

should be the extent to which the Court has previously addressed

the issues presented for review. In the instant proceedings, this

Court has recently, and clearly, decided each of the issues

petitioners seek to have reviewed.

The Court decided Nelson just last term, and in that case

extensively analyzed the commercial activity exception to the

FSIA and delineated the elements necessary to establish a waiver

under the first clause of this section. While the Nelson Court did

not address the second and third clauses of the commercial activity

exception and did note that there may be a more tenuous nexus

between the claims asserted and the commercial activity under

those clauses, the extent of the nexus required under these clauses

of the FSIA was addressed in Republic of Argentina v. Weltover,

Inc., __U.S.__, 112 S. Ct. 2160 (1992).

Weltover was a unanimous decision and eight Justices joined

in the Nelson judgment. Together, these decisions provide clear

guidance as to the interpretation of the commercial activity

exception to the FSIA and leave no issues, relevant to this case,

unresolved. This Court has clearly spoken on these issues, and it is

aaa

12

the duty of Circuit Courts of Appeals and District Courts to apply

these holdings to the individual fact patterns with which they are

presented. This is precisely what the Third Circuit did in the

instant action.

Moreover, to the extent petitioners raise issues as to whether

the Third Circuit properly held that ABP’s separate juridical status

should be respected, the Court addressed these issues in Bancec.

Petitioners have not offered any reason for the Court to revisit this

decision.

Il.

THE THIRD CIRCUIT’S DECISION IS NOT

INCONSISTENT ‘WITH DECISIONS OF OTHER

CIRCUITS.

Petitioners argue that this Court should issue a writ of

certiorari because the Third Circuit’s decision is allegedly

inconsistent with decisions of other Circuit Courts of Appeal in

Vermeulen v. Renault, U.S.A., Inc., 985 F.2d 1534 (11th Cir. 1993);

Antares Aircraft v. Fed. Republic of Nigeria, 999 F.2d 33 (2d Cir.

1993), cert. denied, __ U.S. __, 114 S. Ct. 878 (1994); General

Elec. Capital Corp. v. Grossman, 991 F.2d 1376 (8th Cir. 1993);

Siderman de Blake v. Republic of Argentina, 965 F.2d 699 (9th Cir.

1992), cert. denied, __U.S.__, 113 S. Ct. 1812 (1993); and Texas

Trading & Milling Corp. v. Fed. Republic of Nigeria, 647 F.2d 300

(2d Cir. 1981), cert. denied, 454 U.S. 1148 (1982).® In fact, the

8. Petitioners also cite Gibbons v. Udaras na Gaeltachta, 549 F. Supp.

1094 (S.D.N.Y. 1982), in support of this assertion. However, Gibbons is a

district court case. This Court does not grant certiorari for a conflict between a

district court decision and a circuit court decision. See Supreme Court Rule

10.1(a).

13

courts in each of these cases interpreted the third clause of the

commercial activity exception in the same manner as the Third

Circuit.

In each instance, the courts recognized that there must be

some substantive nexus between the claims asserted and the

commercial activity in which the foreign sovereign is alleged to

have engaged. The reason the courts found a waiver in those

actions was that, under the facts presented, there was such a nexus.

Indeed, in many of these cases, the plaintiff’s claims were based

upon the very commercial activity through which the foreign

sovereign had waived its immunity, and the actual issue presented

for appeal was whether there was a direct effect in the United States

from this commercial activity.

For instance, in Vermeulen, the plaintiff was the owner of a

Renault automobile and brought claims alleging the negligent

design and manufacture of the 1982 LeCar passenger restraint

system. Vermeulen, 985 at 1543. The Eleventh Circuit applied the

third clause of the commercial activity exception to determine

whether plaintiff’s claims were acts performed in connection with

a commercial activity of the defendant outside the United States

and concluded that the design and manufacture of the LeCar

“unquestionably were acts connected to a commercial activity . . .

outside the United States.” Id. at 1544. The Vermeulen court

applied the same legal standard as did the Third Circuit, but a very

different set of facts led it to reach an opposite conclusion.

Similarly, Texas Trading, General Electric, Siderman and

Antares Aircraft are not applicable because each focused on the

interpretation of the “direct effect” language of the third clause of

the commercial activity exception. None of these cases contain an

in-depth analysis as to whether the claims being sued upon were

based upon acts performed in connection with commercial

activity. However, the Texas Trading court addressed the “based

14

upon” language of the third clause of the commercial activity

exception in a footnote. The court found that Nigeria’s cement

contracts and letters of credit qualified as commercial activity.

Texas Trading, 647 F.2d at 310. With respect to the actions upon

which the suit was based, namely the anticipatory repudiation of

those cement contracts and letters of credit, the court had “little

doubt” that these actions were based upon acts performed in

connection with the defendants’ commercial activity. Jd. at 311

n.30. The factual scenario in Texas Trading offered the Second

Circuit a clear causal link, but the Third Circuit could not have

reached a similar conclusion given the findings of fact in this case.

A mere difference in result does not establish a conflict among

the circuits under Supreme Court Rule 10. To satisfy this

requirement, the Circuit Courts of Appeal must actually disagree

as to the interpretation of what a statute means or what the

substantive rule of law should be. There is no such divergence of

opinion here.

Ill.

THE THIRD CIRCUIT CORRECTLY INTERPRETED

THE THIRD CLAUSE OF THE FSIA AND ITS

CONCLUSION IS CONSISTENT WITH THE PLAIN

LANGUAGE OF THE STATUTE, WITH RECENT

SUPREME COURT PRECEDENT AND WITH DECISIONS

OF OTHER CIRCUITS.

The Third Circuit correctly held that the district court erred in

finding that it had subject matter jurisdiction over ABP under the

third clause of the commercial activity exception because the

claims alleged by petitioners were not “‘based upon’ acts

performed ‘in connection with’ ABP’s commercial activity.” (Pet.

App. 44a). The express language of the commercial activity

exception demonstrates that the Third Circuit correctly held that

15

there must be a substantive connection between the claims asserted

in the litigation and the commercial activity in question.

The clause in question specifically states that a foreign

sovereign’s immunity shall be waived in any case “in which the

action is based upon . . . an act outside the territory of the United

States in connection with a commercial activity of the foreign state

elsewhere and that act causes a direct effect in the United States.”

While the litigation does not have to be based upon the commercial

activity itself, it must be based upon an act undertaken in

connection with this commercial activity. Moreover, this Court

adopted this interpretation of the statute in Weltover.

In this respect, there is no basis for petitioners’ contention that

the Third Circuit applied the more stringent “based upon” standard

rather than merely determining whether the act sued upon was

performed “in connection with” a commercial activity. To the

contrary, the Third Circuit accurately noted that this Court “did not

describe the extent of a substantive connection required under the

second and third clauses of the commercial activity exception in

Nelson because the case raised an issue only under the first clause

of the exception.” (Pet. App. 44a-45a). It specifically addressed the

Nelson dictum and acknowledged that the “in connection with”

language of the third clause might allow for a more tenuous causal

link between the claims alleged and the commercial activities than

that required by the first clause (Pet. App. 44a). However, as the

Third Circuit noted, neither Nelson nor Weltover “stand for the

proposition that jurisdiction lies under the third clause of the FSIA

commercial activity exception if the foreign state undertakes

commercial activity outside the United States when the cause of

action is not causally linked to the commercial activity.” (Pet. App.

4Sa).

The Third Circuit also correctly concluded that there was no

causal link, even under the more liberal standard of the third clause

16

of the commercial activity exception, between petitioners’ claims

and ABP’s commercial activities. The only commercial activity

that the district court found that ABP had engaged in was making

the loan to USA One Associates and forming USA Holding BV. No

one could reasonably contend that the alleged negligent operation

of the Building is based upon any act taken in connection with

those lending activities.

Similarly, the Third Circuit’s conclusion that the acts of USA

Holding BV, USA One BV and USA Two BV may not be attributed

to ABP is consistent with the Bancec decision. Bancec clearly

established that the separate juridical status of foreign sovereigns

should be generally respected. Every Circuit Court of Appeals to

have considered the issue has read Bancec as prohibiting the

attribution of the activities of one agency or instrumentality of a

foreign sovereign to another agency or instrumentality for

purposes of determining whether it has engaged in commercial

activity within the United States. See Arriba Ltd. v. Petroleros

Mexicanos, 962 F.2d 528, 533-34 (Sth Cir. 1992); Foremost-

McKesson v. Islamic Republic of Iran, 905 F.2d 438, 447 (D.C. Cir.

1990); Hester Int’l Corp. v. Fed. Republic of Nigeria, 879 F.2d 170,

176 (Sth Cir. 1989); Hercaire Int’l, Inc. v. Argentina, 821 F.2d 559,

565 (11th Cir. 1987); Letelier v. Republic of Chile, 748 F.2d 790,

795 (2d Cir. 1984), cert. denied, 471 U.S. 1125 (1985).

It is accordingly the exceptional case in which the acts of one

foreign sovereign may be attributed to the other. Bancec

established that this may occur only where: (1) the entity is so

extensively controlled by its owner that a principal/agent

relationship is created; or (2) to recognize the corporate form

would work “fraud and injustice.” 462 U.S. at 629. Once again, the

factual findings of the district court preclude the conclusion that

either exception applies here.

As noted previously, the district court found no evidence that

17

ABP exercised undue control over USA Holding BV, USA One BV

or USA Two BV. Given this finding of fact, there is no basis to hold

that a principal/agent relationship existed between ABP and any of

these entities.

Petitioners’ complaint that the Third Circuit erred in focusing

only upon ABP’s relationship to USA Holding BV is without basis.

The record precludes a finding that ABP controlled any of these

entities. Moreover, USA One BV and USA Two BV are not even

ABP’s subsidiaries. As such, it was proper for the Third Circuit to

conclude that it was not necessary to address this issue with respect

to ABP because the court had already found that there was no

jurisdiction over USA Holding BV, the parent of USA One BV and

USA Two BV.

The district court failed to find any facts to demonstrate that it

would work a fraud or injustice to recognize the separate juridical

status of ABP. Indeed, the district court’s conclusion was

inconsistent with Bancec’s admonition that the independent status

of foreign sovereigns must be respected. It was also inconsistent

with the statement in the legislative history of the FSIA that:

If U.S. law did not respect the separate juridical

identities of different agencies or

instrumentalities, it might encourage foreign

jurisdictions to disregard the juridical

divisions between different U.S. corporations

or between a U.S. corporation and its

independent subsidiary.

H. Rep. No. 1487, 94th Cong. 2d Sess. 29-30 (1976), reprinted in

1976 U.S.C.C.A.N. 6628-29.

18

IV.

THIS COURT SHOULD NOT GRANT CERTIORARI

TO REVIEW THE DISTRICT COURT’S FACTUAL

FINDINGS.

Petitioners’ real complaint is with the district court because it

found that the commercial activity in which ABP engaged was the

loan transaction as opposed to the ownership, operation and/or

management of the Building.’ Petitioners’ entire argument that

their claims arise out of acts undertaken in connection with ABP’s

commercial activity and that ABP exercised undue control over

USA Holding BV, USA One BV and USA Two BV rests upon their

assertion that ABP directed the manner in which the Building

should be operated.

The fundamental flaw with petitioners’ attempt to obtain a

writ of certiorari with respect to these issues is that this Court does

not, and should not, accept an appeal simply to review district court

findings of fact. Courts of Appeals should devote their primary

attention to legal issues, with the record having been constructed

below and settled for purposes of the appeal. Salve Regina College

v. Russell, 499 U.S. 225, 232 (1991). This principle is even more

appropriate with respect to this Court. See Goodman v. Lukens

Steel Co., 482 U.S. 656, 665 (1987) (Court reluctant to examine

record where both courts below agreed on facts). Moreover,

findings of fact are subject to a clearly erroneous standard of

review and, thus, it is the rare instance in which they will be

reversed. This Court’s precious resources should not be wasted

9. Petitioners devote a substantial portion of their Statement of the Case to

detailing ABP’s involvement in negotiations leading up to USA One Associates’

acquisition of an interest in E/R Associates, the owner of the Building. See, e.g.,

Petition for a Writ of Certiorari at 6-8. The district court did not accept these

alleged preacquisition activities as a basis for any of petitioners’ direct damage

claims.

cme + one etethbene! me Fe

19

upon a review of issues in which it is likely to have so little impact.

While this Court should not even consider petitioners’ factual

arguments, it is noted that these arguments are completely without

basis. This is illustrated by the fact that petitioners’ Statement of

the Case contains no record citations whatsoever. In fact,

petitioners’ entire Statement of the Case consists of either

statements that find no support in the record, distortions of the

testimony of record or misleading or incomplete recitations of the

evidence.

For example, on the issue of whether ABP unduly controlled

USA Holding BV, USA One BV and USA Two BV, ABP submitted

extensive evidence that a!l corporate formalities were followed

with respect to these entities, they were adequately capitalized

(with for instance thirty million dollars in capital being contributed

initially to USA One BV and USA Two BV) and maintained their

own books and records and bank accounts. Petitioners did not and

cannot controvert such evidence. They have argued that the fact

that USA One BV and USA Two BV did not have a Board of

Directors (Petition for a Writ of Certiorari at 8), must mean that

they are sham subsidiaries. In doing so, they failed to recognize or

acknowledge that these corporations are organized under the laws

of the Netherlands, and Dutch corporations do not have boards of

directors. Instead, they have managing directors, and both USA

One BV and USA Two BV had the appropriate number of

managing directors.

Similarly, there is no evidence in the record of any actions

ABP took with respect to the management of the Building. Once

again, as an illustration, it is a flat misstatement for petitioners to

assert that, after USA One Associates acquired an interest in the

Building, ABP engaged Rodin Investment Administration

Company (“Rodin”) to manage this investment. The record is

clear, and the district court expressly found, that USA One

Associates, not ABP, engaged Rodin (Pet. App. 122a).

20

Indeed, the record demonstrates that neither the actual owner

of the Building (E/R Associates), its partners (USA One

Associates, The Equitable Life Assurance Society of the United

States and Pan American Office Investments, Inc.) or the managers

of the Building intentionally or negligently violated any fire code

provisions or knew or should have known of any defects in the fire

detection, alarm and suppression equipment or other life safety

equipment. They engaged licensed and qualified independent

contractors to install, repair and inspect all necessary equipment,

and, in fact, on the night of the fire, the Building exceeded code

requirements. The isolated failures of the fire detection, alarm and

suppression equipment were the result of the negligence of the

independent contractors.

V.

BECAUSE THE DISTRICT COURT’S FINDINGS

WERE NOT CLEARLY ERRONEOUS, THE THIRD

CIRCUIT WAS CORRECT TO LIMIT ITS REVIEW TO

THOSE FACTS DEVELOPED BELOW.

Finally, petitioners insist that the Third Circuit committed

“grave error’ by not considering certain evidence of ABP’s alleged

commercial actions in the United States (Pet. App. 26a). This

argument is refuted by well-established case law stating that the

circuit court is limited in its review to those facts developed in the

district court. See, e.g., Clark v. K-Mart Corp., 979 F.2d 965, 967

(3d Cir. 1992) (en banc); Jn re Capital Cities, 913 F.2d 89, 96 (3d

Cir. 1990); Bass v. Attardi, 868 F.2d 45, 51 (3d Cir. 1989) (per

curiam).

Thus, it is not the duty of an appellate court to make

evidentiary determinations, and the Third Circuit, in its opinion,

correctly stated that this case presents no reason to create an

exception to the rule that the “only proper function of a court of

21

appeals is to review the decision below on the basis of the record

that was before the district court. [citation omitted}” (Pet. App.

31a).

Petitioners were given ample opportunity to conduct

discovery and submit whatever evidentiary materials they

believed were appropriate in responding to ABP’s Motion to

Dismiss. If they did not provide materials to the district court, that

is their own fault for which they must bear responsibility.

Petitioners also take issue with the district court’s reliance on

its findings of fact in the Federal Insurance action. However, the

court had all of the arguments, testimony and documents submitted

by petitioners as well as the plaintiffs in the Federal Insurance

action before it when it made its findings of fact.

There was ample support in the record for these findings.

Accordingly, the Third Circuit properly concluded that they were

not clearly erroneous and based its decision upon the facts as

determined by the district court. Even if this Court were to grant

certiorari, which it should not, it could properly do nothing

different.

22

CONCLUSION

The Third Circuit Court of Appeals was correct in ruling that

ABP is immune from suit under the FSIA. The Third Circuit’s

interpretation of the third clause of the commercial activity

exception is consistent with the plain language of the statute and

with Supreme Court precedent. Furthermore, the decision is not in

conflict with other courts of appeals, but instead is supported by

other authority. The Third Circuit also correctly adhered to the

legal principles regarding the separate juridical status of ABP.

Finally, the Third Circuit was correct in limiting its review of the

record to those facts developed by the district court. For these

reasons and those set forth above, the Petition for a Writ of

Certiorari should be denied.

Respectfully submitted,

STEPHEN A. COZEN

Counsel of Record

ROBERT W. HAYES

E. J. BORRACK

COZEN AND O’ CONNOR

The Atrium, Third Floor

1900 Market Street

Philadelphia, Pennsylvania 19103

(215) 665-2000

KATHLEEN M. COMFREY

SHEARMAN & STERLING

Citicorp Center

153 East 53rd Street

New York, New York 10022

(212) 848-4000

Attorneys for Respondent